Ennore Coke Limited, CHENNAI V. ACIT, CHENNAI

ITA 1847/CHNY/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7842 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 28-12-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 13-08-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR B NISCHAL
• Assessee Lawyers: R SIVARAMAN
• Section: 133(6); 144

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . . . , . , % BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.1847/MDS/2015 ( / ASSESSMENT YEAR: 2011-12) M/S. ENNORE COKE LTD. 25, FLOWERS ROAD, 3 RD FLOOR EGMORE BENEFIT SOCIETY BUILDINGS, CHENNAI-600 084. VS THE ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-2(1) CHENNAI-34. PAN:AAACK1631Q ( /APPELLANT) ( /RESPONDENT) & ./ I.T.A.NO.1980/MDS/2015 ( / ASSESSMENT YEAR: 2011-12) THE ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-2(1) CHENNAI-34 VS M/S. ENNORE COKE LTD. 25, FLOWERS ROAD, 3 RD FLOOR EGMORE BENEFIT SOCIETY BUILDINGS, CHENNAI-600 084. PAN:AAACK1631Q ( /APPELLANT) ( /RESPONDENT) ASSESSEE BY : MR. R.SIVARAMAN,ADVOCATE REVENUE BY : DR.B.NISCHAL, JCIT /DATE OF HEARING : 28 TH DECEMBER, 2015 /DATE OF PRONOUNCEMENT : 4 TH MARCH, 2016 / O R D E R PER A. MOHAN ALANKAMONY, AM: THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AN D REVENUE RESPECTIVELY AGGRIEVED BY THE ORDER OF TH E LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-6, CHENNAI D ATED 15.06.2015 IN ITA NO.377/CIT(A)-6/2014-15 PASSED U NDER SECTION 144 R.W.S.145(3) & 250(6) OF THE ACT. 2 ITA NOS.1847 & 1980/MDS/2015 ITA NO.1847/MDS/2015 (ASSESSEES APPEAL): 2. THE ONLY GROUND RAISED BY THE ASSESSEE IN ITS AP PEAL IS THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) HAS ERRED BY CONFIRMING THE ADDITION OF ` 6,75,98,936/- MADE BY THE LEARNED ASSESSING OFFICER IN RELATION TO ESTIMA TION OF GROSS PROFIT FOR THE ASSESSMENT YEAR 2011-12. ITA NO.1980/MDS/2015: (REVENUES APPEAL):- 3. THE ONLY GROUND RAISED BY THE REVENUE IN ITS APP EAL IS THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) HAS ERRED IN DIRECTING THE LEARNED ASSESSING OFFICER TO ADOPT THE AVERAGE GROSS PROFIT MARGIN OF 8.22% IN COMPUTING T HE GROSS PROFIT OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2011 -12. ASSESSEES APPEAL: 4. BRIEF FACTS ARE THAT THE ASSESSEE COMPANY IS ENG AGED IN THE BUSINESS OF MANUFACTURE OF COKE AND TRADING IN COAL AND COKE FILED ITS E-RETURN OF INCOME FOR THE ASSES SMENT YEAR 2011-12 ON 31.03.2013 ADMITTING TOTAL INCOME AT ` 9,22,71,700/-. THE CASE WAS SELECTED FOR SCRUTINY AND FINALLY ASSESSMENT WAS COMPLETED UNDER SECTION 144 READ WITH SECTION 145(3) OF THE ACT, WHEREIN THE LEARNED ASSESSING OFFICER MADE ADDITION OF RS.39,86,45,413/- BY ESTI MATING THE 3 ITA NOS.1847 & 1980/MDS/2015 GROSS PROFIT OF THE ASSESSEE @ 13.19%. DURING THE C OURSE OF ASSESSMENT PROCEEDINGS, THE LEARNED ASSESSING OFFIC ER DIRECTED THE ASSESSEE TO FURNISH DETAILS OF SUPPLIE RS OF RAW MATERIALS. AFTER RECEIPT OF THE DETAILS OF SUPPLIE RS, INFORMATION WAS CALLED FOR FROM 12 SUPPLIERS OF COKE/COAL UNDER SECTION 133(6) OF THE ACT. HOWEVER, NEITHER THE SUPPLIERS OF THE ASSESSEE NOR THE ASSESSEE FURNISHED THE ENTIRE DETA ILS CALLED FOR, THEREFORE THE LEARNED ASSESSING OFFICER PROCEE DED TO COMPLETE THE ASSESSMENT BY ESTIMATING THE GROSS PRO FIT. THEREAFTER, THE LEARNED ASSESSING OFFICER ESTIMATED THE GROSS PROFIT OF THE ASSESSEE AT 13.19% BEING GROSS PROFIT DECLARED BY THE ASSESSEE IN THE PRECEDING ASSESSMENT YEAR VI Z. 2010- 11, BECAUSE NO OTHER COMPARABLES WERE AVAILABLE WIT H THE LEARNED ASSESSING OFFICER FOR ESTIMATING THE PROFIT . ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) CONSIDERING THE ISSUE IN DETAIL ESTIMATED THE GROSS PROFIT OF THE ASSESSEE AT 8.22% AND THEREBY SUSTAINED THE ADD ITION OF RS.6,75,98,936/-. WHILE DOING SO, HE MADE THE FOLLO WING OBSERVATION:- I) SINCE THE ASSESSEE AND ITS SUPPLIERS DID NOT FUR NISH ALL THE INFORMATION SUCH AS COPIES OF OUTWARD REGIS TER, 4 ITA NOS.1847 & 1980/MDS/2015 LORRY RECEIPT, DELIVERY CHALLANS, ETC., IN RELATION TO PURCHASE OF MATERIALS FROM THE 12 SUPPLIERS FROM WH OM THE INFORMATION WERE CALLED FOR AND SINCE THEY HAVE NOT CO-OPERATED WITH THE REVENUE, ESTIMATING THE GROSS PROFIT OF THE ASSESSEE IS INEVITABLE. II) THE GROSS PROFIT MARGIN OF 13.99% IS ARRIVED AT IN THE ASSESSMENT YEAR 2010-11 BY CONSIDERING THE DIFFERENCE BETWEEN SALES AND THE COST OF MATERIA LS CONSUMED. HOWEVER, FOR THE ASSESSMENT YEAR 2011-12 ALONG WITH THE COST OF MATERIALS CONSUMED CERTAIN DIRECT EXPENSES WERE ALSO TAKEN INTO CONSIDERATION AND THEREFORE TO THAT EXTENT ADJUSTMENT HAS TO BE MADE IN ARRIVING AT THE GROSS PROFIT RATE FOR THE RELEVANT ASSESSMENT YEAR. III) THE MONTHLY PURCHASE PRICE OF THE MATERIALS CONSUMED SHOWS STEEP INCREASE WHICH RESULTS IN EROSION OF PROFIT HENCE BEST APPROACH WOULD BE TO CONSIDER THE AVERAGE GROSS PROFIT FOR THE FINANCIAL YEAR 2008-09 AND 2009-10 WHICH WORKS OUT TO 8.22%. 5 ITA NOS.1847 & 1980/MDS/2015 5. THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED BEFORE US THAT THE GROSS PROFIT WORKED OUT BY LEARN ED COMMISSIONER OF INCOME TAX (APPEALS) IS ON THE HIGH ER SIDE THOUGH HE HAS GIVEN RELIEF TO THE ASSESSEE BY CONSI DERING CERTAIN FACTUAL ISSUES WHILE ESTIMATING THE GROSS P ROFIT. HE FURTHER PLEADED THAT SOME MORE RELIEF MAY BE GRANTE D TO THE ASSESSEE BECAUSE THE ASSESSEE SHOULD NOT BE PENALIZ ED FOR THE NON-CO-OPERATION OF THE ASSESSEES SUPPLIERS BE FORE THE REVENUE. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE O THER HAND VEHEMENTLY ARGUED IN SUPPORT OF THE ORDER OF T HE LEARNED ASSESSING OFFICER AND PLEADED THAT THE SAME MAY BE SUSTAINED BY SETTING ASIDE THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE MATERIALS AVAILABLE ON RECORD. THE REVE NUE HAS PROCEEDED TO ESTIMATE THE GROSS PROFIT OF THE ASSES SEE BECAUSE THE ASSESSEE AND ITS SUPPLIERS DID NOT FURN ISH THE INFORMATION CALLED FOR BY THE REVENUE. WE FIND THE INFORMATION SOUGHT BY THE REVENUE TO BE QUITE REASO NABLE 6 ITA NOS.1847 & 1980/MDS/2015 AND ESSENTIAL TO ASCERTAIN THE GENUINENESS OF THE P URCHASES MADE BY THE ASSESSEE BECAUSE THEY WERE NOTHING BUT COPY OF THE PURCHASE ORDER, SALES BILLS, LORRY RECEIPT, AND DELIVERY CHALLANS AND WEIGHING SLIPS ETC. IN THESE CIRCUMSTA NCES, THE REVENUE HAS NO OTHER OPTION BUT TO ESTIMATE THE GRO SS PROFIT OF THE ASSESSEE. WHILE DOING SO, THE LEARNED ASSESS ING OFFICER HAS ESTIMATED THE GROSS PROFIT OF THE ASSES SEE BY ADOPTING THE GROSS PROFIT MARGIN OF THE EARLIER ASS ESSMENT YEAR OF THE ASSESSEE. ON APPEAL, THE LEARNED COMMIS SIONER OF INCOME TAX (APPEALS) GRANTED RELIEF TO THE ASSES SEE BY CONSIDERING THE ACCOUNTS MAINTAINED BY THE ASSESSEE AND THE BUSINESS DYNAMICS DURING THE RELEVANT ASSESSMEN T YEAR AND PRECEDING ASSESSMENT YEAR AND THEREBY ESTIMATED THE GROSS PROFIT AT 8.22%. IN THE PROCEEDINGS BEFORE US THE ASSESSEE HAS NOT PRODUCED ANY ADDITIONAL MATERIALS BEFORE US TO SUBSTANTIATE AS TO WHY THE GROSS PROFIT OF TH E ASSESSEE HAS TO BE REDUCED FURTHER. THE LEARNED AUTHORIZED REPRESENTATIVE COULD ALSO NOT ADVANCE ANY ARGUMENTS ON MERITS TO REDUCE THE GROSS PROFIT MARGIN OF THE ASS ESSEE MORE THAT THE RELIEF GRANTED BY THE LEARNED COMMISSIONER (APPEALS). IN THESE CIRCUMSTANCES, THE PRAYER OF TH E 7 ITA NOS.1847 & 1980/MDS/2015 ASSESSEE TO FURTHER REDUCE THE GROSS PROFIT MARGIN TO DETERMINE THE ESTIMATED PROFIT OF THE ASSESSEE FOR THE RELEVANT ASSESSMENT YEAR DO NOT HAVE ANY MERIT. HOW EVER, IN THE INTEREST OF JUSTICE, CONSIDERING THE OVERALL FA CTS AND CIRCUMSTANCES OF THE CASE, WE HEREBY DIRECT THE LEA RNED ASSESSING OFFICER TO COMPUTE THE GROSS PROFIT OF TH E ASSESSEE BY ADOPTING THE GROSS PROFIT MARGIN AT 8% INSTEAD O F 8.22% AS HELD BY THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS). 8. SINCE WE HAVE REDUCED THE GROSS PROFIT DETERMIN ED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AN D SUSTAINED TO THE EXTENT OF 8% AND HELD THE ISSUE PA RTIALLY IN FAVOUR OF THE ASSESSEE, THE APPEAL OF THE REVENUE D OES NOT SURVIVE. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED AND APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 4 TH MARCH, 2016 SD/- SD/- ( . . . ) ( . ) (N.R.S.GANESAN) ( A.M OHAN ALANKAMONY ) ! # / JUDICIAL MEMBER # / ACCOUNTANT MEMBER ! /CHENNAI, ' /DATED 4 TH MARCH, 2016 SOMU 8 ITA NOS.1847 & 1980/MDS/2015 )* +* /COPY TO: 1. APPELLANT 2. RESPONDENT 3. , () /CIT(A) 4. , /CIT 5. * 0 /DR 6. /GF .